It’s certainly easier to carry a compass around than it is a map, and in a pinch, a compass gives the captain an idea of the direction the boat is headed. The Summary Plan Description (SPD) is the compass that helps keeps the 401(k) plan on course. It is a relatively brief overview of the plan’s terms, benefits, and how it works. Typically, an SPD is only 10-20 pages, it is not as comprehensive as the plan document and must be written in plain, understandable language.
It can also help new committee members get caught up to speed quickly so they can confidently participate in meaningful discussions about the plan. It doesn’t serve as a substitute for the official plan document, but a supplement that hits the highlights.
The SPD is also the main vehicle for communicating with participants and beneficiaries about the plan. A copy of the SPD must be distributed to new participants in an existing plan within 90 days of becoming covered by the plan, and a new beneficiary must receive a copy within 90 days of commencing benefits.
Since it is relatively short and easy to read, committee members should review their SPD at least annually to refamiliarize their understanding of plan terms and conditions. Just as you would expect a captain to have a compass handy each time they set sail, a fiduciary should take a copy of the SPD to all committee meetings and refer to it often.
At the end of the day, it’s the fiduciary committee’s responsibility to make decisions solely in the best interest of participants, while operating within the parameters set by the plan sponsor. When the committee is comfortable with the rules, it becomes easier to engage in impactful discussions that may make all the difference. Keeping the SPD close by should help fiduciaries feel better equipped to stay on the course and help get participants to Retirement Island on time.
